Sale of Interest in Prognoz Silver Mine

(Incorporated in Guernsey with registered number 51576 under the provisions of The Companies (Guernsey) Law, 2008 as amended)

19 February 2018

Polar Acquisition Limited ("PAL") agrees to sell its interest in the Prognoz Silver Mine in Russia to Polymetal International PLC.

· Sale of 90% of Polar Silver Resources for US$72 million

· PAL to retain a continued interest through royalty on future production from Prognoz

· Transaction results in uplift in valuation of PAL of approximately 25%

Baker Steel Resources Trust Limited (the "Company") announces that its largest investment, Polar Acquisition Limited ("PAL") has agreed to sell its 90% interest in Polar Silver Resources Limited ("Polar Silver") to Polymetal International plc ("Polymetal")(LSE, MOEX: POLY; ADR: AUCOY) for US$72 million to be satisfied in Polymetal shares.

In January 2017, PAL sold a 10% stake in its subsidiary Polar Silver to Polymetal, which committed to fund and undertake a pre-feasibility study on the Prognoz silver project in Russia. As part of that agreement Polymetal was granted an option to acquire the remaining 90% of Polar Silver in March 2019 for a price based on silver reserves and the silver price at that time. Following a successful field season in 2017, during which 37km of diamond drilling was undertaken, PAL and Polymetal have now agreed to accelerate the exercise of the option such that Polymetal will upon closing acquire PAL's 90% interest in Polar Silver for US$72 million to be satisfied in new Polymetal shares. 90% of the consideration shares will be subject to a lock-up period of 180 days.

Polar Silver holds a 50% interest in Prognoz silver project which has JORC-compliant Indicated and Inferred Resources (estimated by Micon in 2009) of 292 million ounces of silver at a grade of 586 g/t.

In order to retain exposure to Prognoz going forward, including the attractive exploration potential, PAL will receive a royalty of between 2% and 4% (pro rated by the net 45% stake being acquired) on future production from the mine. The royalty has been valued based on the current pre-development status of the Prognoz project and it can be expected to appreciate as the project moves towards production.

Taking into account the value of the Polymetal shares to be received by PAL and the valuation of the royalty, the Company's carrying value of PAL can be expected to increase to approximately US$41 million at the next NAV date, a 25% increase on the carrying value at 31 January 2018. On a pro forma basis this transaction would have increased the Company's NAV by approximately 9% had the agreement been signed prior to 31 January 2018. The Company has invested a total of US$14.2 million over the past seven years into PAL, realised US$6 million in cash during 2017, resulting in a return on investment of in excess of 3 times.

Subject to the receipt of the required Russian regulatory approvals, the transaction is expected to close in during the first quarter of 2018

Polymetal is a major gold company listed on the London Stock Exchange with a market capitalisation of approximately £3.5 billion. During 2017 it produced 1.43 million ounces of gold equivalent. In 2017, Polymetal paid out US$138 million in dividends, translating into a 2.7% dividend yield based on the average share price for the year.

The Net Asset Value ("NAV") figure stated is based on unaudited estimated valuations of the underlying investments and not necessarily based on observable inputs. Such estimates are not subject to any independent verification or other due diligence and may not comply with generally accepted accounting practices or other generally accepted valuation principles. In addition, some estimated valuations are based on the latest available information which may relate to some time before the date set out above.

Accordingly, no reliance should be placed on such estimated valuations and they should only be taken as an indicative guide. Other risk factors which may be relevant to the NAV figure are set out in the Company's Prospectus dated 26 January 2015.

Baker Steel Capital Managers LLP (“BSCM”) is a specialist natural resources asset management and advisory firm, authorised and regulated by the Financial Conduct Authority, operating from its head office in London and its branch office in Sydney. The firm was...

Baker Steel Capital Managers LLP (“BSCM”) is a specialist natural resources asset management and advisory firm, authorised and regulated by the Financial Conduct Authority, operating from its head office in London and its branch office in Sydney. The firm was founded in 2001 by the principals David Baker and Trevor Steel, who were also founding members of the Blackrock mining team in 1992.

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